Pricing strategy
What pricing strategy is and how it is used by organisations when creating and innovating business plans.
Once organisations have planned and created a product/service they will need to use a pricing strategy to determine what price point/method will be the best-fit choice in conjunction with their organisational aims and objectives, there are many different ways that organisations can price their products/services.
value-based pricing is the process of taking the information provided by consumers on how much they think they should be paying, this is an excellent and suitable method because it will provide primary and secondary research of your own and similar products and services by using this method your organisation will already have a thorough understanding of your consumers needs and what their perception of value for money is when purchasing from your organisation.
As of 2022 organisations should consider using dynamic pricing because of the current economy, because of the state of the economy things such as currency value are changing, and stock markets are constantly changing, this method is particularly suited for organisations that provide dropshipping and reselling services. Shivani Pai explains In a blog how "
Uber also uses Machine Learning to forecast market conditions that contain everything from traffic and weather to local events and global news for the pricing strategy to work". uber is one of the most iconic and well-known organisations that have implemented this system you probably know for yourself when it is busier on the roads and at peak times uber will inflate the cost of the fare so that they can cover their expenses such as road tax fuel price another way that uber uses dynamic pricing is by evaluating the price based how my available drivers there are so if there are more drivers available the ride will probably cost less and the relative formula if there are fewer drivers available.
Loss leader strategy is an unorthodox strategy and is only really used by large, global organisations because of the risk versus reward aspect. Loss leader is when an organisation prices a product at a certain price point knowing fully well that it is costing them more money to produce and ship than the profit that it's making, one example that comes to mind is Costco because of their $4.99 rotisserie chicken, Ernest Baskin. explains the intent behind it here “Once [customers] are in the store, they can fill out the rest of their basket, which the store might make a higher margin on,” this form of link selling is one of the main contributors to Costco's 2021 £195,929 annual revenue.
Reference list
Pai. S. (2021) "How these 8 brands drove massive success from Dynamic Pricing (and you can too!)" [Online] Available from https://www.blog.datahut.co/post/dynamic-pricing [Accessed 8th November]
Meyersohn. N. (2022) "Prices on almost everything at the grocery store are up - except rotisserie chicken. Here’s why" [Online] Available from https://edition.cnn.com/2022/05/26/business/rotisserie-chicken-food-grocery-stores/index.html [Accessed 9th November]
Nice job Shane you clearly showed an interest in pricing strategies and how they affect businesses. I also like how you talk about dynamic pricing as it isn't commonly talked.
ReplyDeleteGreat job Shane. You discussed the difference between the customers intentions of what should be paid and how important a factor it can be for the customers order. You added great detail and backed up your points with Harvard reference. I like how you spoke about the costs and how impactful it is to a corporation and one that cannot be overlooked as it can alter the way prices go.
ReplyDeleteThis is so interesting to see the psychology behind pricing products and services and how all companies are going to need to change their pricing because of the way the economy is heading. It is also interesting to see how the different pricing strategies have an impact on companies and consumers!
ReplyDeleteHi Shane. I really enjoyed reading your blog. You did a great job at explaining different pricing strategies. The examples you used of using dynamic pricing really helped me understand the points better.
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